The issues that I'm facing are that the artist I'm working with and I have a player character that we want to animate that will be around 32 wide by 64 high.

He may have a spear, which may be 128 long.

Should we create one sprite sheet for that character with all of the animation stuff manually specified with xml or should we create three sheets, 64x64, 128x128, 256,256, etc?

EDIT: Think like secret of mana, evermore, beyond oasis.

The issue is since java draws from top left coordinates then we'll have to be constantly concerned about the offset of the sprite since his location will be in reality x and y away from the location that the top left of his sprite needs to be drawn at.

Oh! I see what the OP means now. The easiest way is to make the spritesheet as tall as the tallest frame then just add alpha above the smaller ones. In a separate file (like the XML file you mentioned) you would set the offset for bounds checking against certain frames.

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